Portfolio

Monday, February 26, 2007

Building a Business for the long term

I have been meaning to do a post on Jonathan Klein and Getty Images for some time. Its unusual to have a a kid brother as a hero but what Jonathan has done with Getty is a great example to anyone setting out to build a sustainable, valuable and widely respected business.He and Mark Getty started out 13 years ago with an idea to build a global, sustainable business for the long term. A rare ambition these days. Most seek an 'exit' within 5.

Jonathan was the youngest ever director of Hambros Bank and Mark was part of his team.They had no idea what kind of business it would be but had some clear criteria. Global potential, large margins, owning core assets (preferably intellectual property).They saw that the digital age would herald a fundamental change in the way that imagery would be stored and distributed and set about acquiring stock-photo libraries. Starting in London with Tony Stone Images in 1995, they made dozens of acquisitions, integrating and consolidating and digitising the images as they went.Getty Images is what has resulted.Jonathan moved the company to Seattle some 6 years ago following the acquisition of Photodisc in Seattle and the company's listing on Nasdaq. Today it is listed on the NYSE and is valued at over $3bn. The stock has been volatile but not the company's earnings which have increased steadily every year.Today, gettyimages.com serves an average of 3.2 billion thumbnails, 7.3 million visits and 4 million unique users in addition to an average of 175 million page views each month. Nearly 100 percent of the company’s visual content is delivered digitally.

Financial Facts

NYSE ticker symbol:

GYI

Revenues (FY 2006):

$807.3 million

Earnings per share (FY 2006):

$2.10 (fully diluted)

Net income (FY 2006):

$129.5 million

So much for the dry facts, but this is a personal post. One about Jonathan and the kind of business he has built. His vision is clear. His communication of that vision internally and externally is equally so. With a string of awards and a company which is universally admired, he has done a remarkable job.

The recent acquisition activity marks a restatement of intent following a difficult period where the street had marked Getty down as 'ex growth' and the share price had taken a whack.

4 comments:

It's really nice to see you post this Robin. Building for the long term is always what I've been interested in but there's so much talk of the exit that it never somehow seems appropriate to say so out loud.

I'd be interested to hear your thoughts on what exit options that there are for investors in a long term business. An IPO is the obvious one but what can one offer investors below that?

Good question, Peter.If a business thrives in the 'long term' [I know this means different things to different people], then it will become self sustaining. It will make profits which can continue to grow the business. It will have access to debt - replacing the equity or adding to it.Exit options for investors - if they don't want to collect the dividends - or if the company needs to retain all its earnings are:*sell to founders or management*IPO (not always practical)*Secondary sale - ie to other investors (this is an active market, I believe)